News Column

Australian Dollar Rises As RBA Holds Key Rate At 2.5%

June 3, 2014



CANBERA (Alliance News) - The Australian dollar strengthened against the US dollar in the Asian session on Tuesday following the Reserve Bank of Australia's decision to leave interest rates at a record low of 2.50%, in line with forecasts.

The monetary policy board governed by Glenn Stevens decided to maintain the cash rate at 2.50% as members said the most prudent course is likely to be a period of stability in interest rates.

The RBA has reduced the cash rate by a cumulative 225 basis points since November 2011 to help the economy sustain economic growth in view of fading support from the mining boom.

The board said continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2-3% target over the next two years.

In the Board's judgment, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target.

Meanwhile, retail sales in Australia were up a seasonally adjusted 0.2% on month in April, the Australian Bureau of Statistics said- coming in at AUD23.168 billion. That missed forecasts for an increase of 0.3% following the 0.1% gain in March.

Australia saw a current account deficit of AUD5.67 billion in the first quarter of 2014, the Australian Bureau of Statistics said.That beat forecasts for a shortfall of AUD7.0 billion following the downwardly revised deficit of AUD11.7 billion in Q4 (originally a deficit of AUD10.1 billion).

The Australian dollar rose to more than a 2-week high of 94.92 against the yen and a 5-day high of 1.0112 against the Canadian dollar, from early lows of 94.49 and 1.0924, respectively. The aussie closed yesterday's deals at 94.64 against the yen and 1.0058 against the loonie. If the aussie extends its uptrend, it is likely to find resistance around 95.44 against the yen and 1.02 against the loonie.

The Australian dollar hit 0.9277 against the US dollar, up from an early multi-day low of 0.9228. The pair closed yesterday's deals at 0.9242. If the aussie rises further, it may find resistance around the 0.93 zone.

Recovering from early lows of 1.4734 against the euro and 1.0924 against the NZ dollar, the Australian dollar rose to 1.4659 and 1.0953, respectively. At yesterday's close, the aussie was worth 1.4628 against the euro and 1.0929 against the kiwi. The next possible upside target for the aussie is seen at 1.45 against the euro and 1.10 against the kiwi.

Looking ahead, In the European session, UK construction PMI for May, Eurozone consumer price index for May and unemployment rate for April are due.

In the New York session, US Factory Orders data for April is due.

Kansas City Fed President Esther George deliver a speech on US economy at 1:50 pm ET in Colorado.



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Source: Alliance News


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